Economy grows faster than first thought in Q3

The economy unexpectedly grew faster than first thought between July and September, thanks to stronger services and construction output, the Office for National Statistics said on Thursday.

However, the economy did not grow at all in the second quarter, and economists forecast a sharp slowdown at the end of this year and early in 2012.

The Office for National Statistics revised third-quarter GDP growth up to 0.6 percent on the quarter from 0.5 percent, but left the annual rate of growth unrevised at 0.5 percent.

However, it revised down second-quarter growth to show stagnation from a previous estimate of a rise of 0.1 percent.

A sharply deteriorating growth outlook and worries that the euro zone debt crisis will tip Britain back into recession encouraged the Bank of England to restart its quantitative easing programme in October.

The central bank has left the door open for further stimulus in February, and most economists reckon it will inject as much as 75 billion pounds on top of the 75 billion it added in October.

The household saving ratio rose to 6.6 percent in Q3, the highest since Q4 2010, suggesting Britons are squirreling away their cash. Britons' household finances have been squeezed by weak wage growth and soaring inflation, which has taken its toll on the retail sector.

However, Bank officials see some ground for optimism as they expect a sharp fall in inflation next year which will leave households with more spare cash.